Kyrgyzstan: Parliament Set to Sanction Manas Fuel-Supply Adjustment

Kyrgyzstan’s parliament is set to approve a measure that would enable a state-affiliated company to assume responsibility for up to half of the aviation fuel supplies to the Manas Transit Center.

The current holder of the supply contract is a Gibraltar-registered entity, Mina Corp. Under the terms of its latest contract signed in November 2010, the company is obliged to share between 20 percent and 50 percent of its business with a Kyrgyz-controlled entity. In order for this to happen, however, an amendment to the US-Kyrgyz basing agreement needs to be ratified by the Kyrgyz parliament. The amendment is due to come up for a vote as soon as April 7.

A recently formed joint Kyrgyz-Russian company is now poised to start supplying up to 50 percent of the Manas base’s fuel needs – if and when the amendment is approved. Gazpromneft-Aero-Kyrgyzstan started supplying fuel to civil aviation customers on April 1. Manas serves as a logistics hub for US and NATO military operations in Afghanistan. A Kyrgyz senior foreign policy official, Sapar Isakov, described the new company’s launch as an “important economic and political step for our state.”

Under the latest Pentagon supply contract for Manas, Gazpromneft-Aero-Kyrgyzstan could have started supplying 20 percent of the base’s fuel needs in February. The delay in parliamentary ratification of the base agreement amendment thus has cost the Kyrgyz government coffers several million dollars in lost revenue. Energy Minister Askarbek Shadiev told the Committee on International Affairs and Inter-parliamentary Cooperation on April 4 that 50 percent of the air base’s fuel contract would be worth up to $4.5 million in revenue for Kyrgyzstan every month.

Meanwhile, a leading Kyrgyz opposition figure claimed that US officials would not object if Bishkek moved to assume full control of the Manas fuel-supply contract. “Today the United States is ready to take jet fuel volumes of 100 percent from Kyrgyzstan, which would supplement our budget, but our authorities reject this,” Akylbek Japarov, an MP representing the Ar-Namys Party, told an April 5 news conference.

President Roza Otunbayeva and other top Kyrgyz officials assert that Mina Corp engaged in improper dealings with representatives of Kurmanbek Bakiyev’s administration, which collapsed in April 2010. Mina representatives have vigorously denied any wrongdoing. A US congressional investigation found that Mina Corp representatives undermined US national security interests by filing misleading documentation in obtaining jet fuel from Russia, but it did not find evidence of wrongdoing in the firm’s Kyrgyzstan dealings.

Mina Corp has faced scrutiny over its opaque operating structure. At the same time, US officials acknowledge that the company maintains an impeccable technical record of fulfilling its contractual obligations.

EurasiaNet.org has discovered that the US government made compensatory payments to Mina Corp in connection with Russian export duties. The payments were made in line with Federal Acquisition Regulations (FAR) and were worth $22.2 million under Mina’s Corp previous contract.

A spokeswoman for the Defense Logistics Agency said that while the US-Kyrgyz basing agreement exempts US government contractors from all local taxes, it does not cover taxes imposed by other countries. “We made these payments pursuant to a bilateral contract modification,” the DLA representative, Mimi Schirmacher, told Eurasianet.org.

“The bilateral Agreement for Cooperation between the Government of the United States and the Government of the Kyrgyz Republic does not cover other countries, thus the United States is not exempted from paying Russian export duties,” Schirmacher said. “The contract modification was authorized by a standard FAR clause, Taxes - Foreign Fixed-Price Contracts. The clause allows contractors to be reimbursed for taxes that were instituted or increased after the contract effective date, and which the US Government is not otherwise exempt from paying under applicable international agreements.”

Russia imposed the export duty in April 2010. Kyrgyz officials described the Russia action as retaliation after Moscow discovered that some of its fuel exports reportedly intended for use at Manas were instead shipped to third countries at inflated prices.

Mina Corp declined to comment on the compensatory payments from the US government. The Russian export tax was abolished in February 2011 following a meeting between Kyrgyz Prime Minister Almazbek Atambayev and his Russian counterpart Vladimir Putin.